Puntland oil row: Examining the explorations of a corrupted authority

21 March 2008

By Faysal Gabanow

The controversial oil exploration deal singed between the administration of the Puntland State of Somalia and foreign companies has again hit the headlines, with the local administration intent on putting its bid into action by mid-year.

The semiautonomous region signed a contract of oil exploration with a company named Consort Private LTD in Dubai in August 2005, but after two months the company sold shares to a small Australian company named "Range Resources" and then to others.

The contents of the agreements were mostly held secret, with Somali politicians, writers, and academics enquiring about the details of the agreement and questioning its legality.

Many have argued that regional administrations don't have the right to ink such agreements in natural resources with foreign firms. Others weighed the equity of the deal to prevent unfair exploitation by foreign firms that partially devastated Africa and contributed to prolonging conflicts in the Congo and other countries.

During his reign as the former prime minister of the Transitional Federal Government of Somalia, Ali Mohamed Gedi embraced contradicting stances towards the deal, one time accepting and then rejecting its legality. In October 2006, Gedi wrote a letter to the Australian Stock Exchange in which he stated that the deal with the regional government of Puntland was invalid, highlighting that the Transitional Federal Government has the sole right to sign such contracts. In his last days in office, Gedi drafted a proposed oil law that was supposed to annul such contracts and pave the way for deals with Asian companies (reports claimed that the Asian companies wanted by Gedi had in fact drafted the proposed oil bill), but met with strong opposition from members in parliament and his cabinet.  It was not passed to the transitional parliament.  Others argued that even the Transitional Government cannot sign long-term agreements, as it was established for a transition period to reconcile the warring factions in Somalia and lead towards a nation-wide free and fair election in 2009.

However, Puntland authorities overlooked the denial of former Prime Minister Ali Mohamed Gedi, and the critics that called for cancellation of such agreements. I have met with Puntland President Gen. Mohamed Muse Hersi "Adde" several times to see if his stance has changed. Nevertheless, he was assertive as ever every time. He doggedly told me that they would start the explorations soon, sometimes undermining the refusal of the TFG, and at one time saying that they agreed with the interim government on the issue.

At this time, Puntland gave up hope for the TFG's approval of its deals either in cabinet or parliament, and passed an oil bill to its local parliament to ratify the deals. But the contents of the oil law were not made public to the media.

Back home in Puntland, the exploration deal has not been warmly welcomed by residents of the territories to be explored - Nugal and Sanaag. Clashes ensued between clan militias and the regional security forces when foreign engineers and explorers tried to oversee some of the areas.

Despite the difficult challenges President Adde's government faces, including insecurity, and political and economical tensions, the government secures its intention to carry out explorations, turning deaf ears to whoever opposes the plan, risking the eruption of unwarranted conflict in the region.

Recently, media sources said that a Canadian oil company, Canmax (now named Africa Oil Company), which bought a share from Range Resources, demanded approval from the president of the TFG, Abdullahi Yusuf, before they went ahead with explorations. The source cited a meeting between Yusuf and Adde in Addis Ababa last month as been related to that matter. However, officials in Addis Ababa dismissed the claim, saying that the issue was not raised.

If we pass over the controversy over the legality of those deals, the ability of Puntland to host such explorations should be analyzed thoroughly. Taking into account the facts and realities on the ground, someone can hardly opt for the accomplishment of the exploration dream in any part of Somalia.

The current administration in Puntland has failed to perform its duties in civil service and security obligations, where clan-based skirmishes, piracy, and robbery have shaped the region's lack of credibility.

Since its establishment in 1998, rampant corruption and power abuse have ruined public services including health, education, and the judiciary, to the despair of obedient tax-paying citizens in the region.

Though endowed with hefty resources, airports, a main sea port and substantial revenue, the millions of dollars generated from these sources miserably went into personal accounts, with vulnerable residents left to cope with hard lives, drought, famine and suffering from preventable diseases.

Not only has corruption devastated the governmental institutions, but it has also affected the independent aid agents and NGOs operating in the region. Some organizations bribe the officials in order to operate undisturbed; others are expelled if they don't pay and face baseless charges (the expulsion of MSF from Galkayo by the regional authority and its negative impact on the northern part of the city is a recent example).

If billions of dollars are generated from these explorations, it wouldn't benefit the people of the region, or Somalis as a whole, but would empower the corrupt regime to the extent that it doesn't dare to listen to the complaints of its citizens or care about their suffering – as seen in other oil producing countries in Africa. "When a government depends less on its own citizens for its revenue, it also may depend less on them for its legitimacy. In extreme cases, a government might eventually feel it has little need for its people at all, seeing them only as a potentially restive force against which it must protect itself and its access to its main source of revenue," says Philip Swanson, senior economist at the ECON Center for Economic Analysis.

Without stable security and practice of governance and accountability to prevent corruption and punish perpetrators, income from natural resources won't be of any advantage to the country, but instead may devastate its structure by encouraging rebellion and independence-seeking entities, as in Sudan.

Generally, natural sources have their cursed side, giving rise to conflicts, particularly in Africa. Some nations scarce of natural resources in Africa are today more stable than others rich in oil and mines. The relation between oil and conflict in Africa has been much discussed in recent years, particularly in regards to Angola, Nigeria and Sudan. Also, many countries have seen conflict only when reservoirs of natural resources were discovered in their territories. Thus Africa's perpetual conflict can be traced back to scarce natural resources or injustice and marginalization in sharing these resources.

The well-known writer and journalist Robert Guest has discussed this phenomenon under the title "Digging Mines Digging Graves" in his book "The Shackled Continent: Africa's past, present and future," in which he sought an answer to why Africa is poor despite being rich in natural resources.

In the case of Puntland, a regional administration dealing with internal security setbacks and political instability – and still part of a nation at war – cannot realize such explorations nor afford to secure the explorers, installations and supply lines. Therefore, the regional authorities should initially focus on improving security, gaining the confidence of their people, and combating the epidemic of corruption and power abuse – instead of mulling over a complicated plan that it cannot realize at this time. They should also open up to the public and publicize their agreements, practice transparency and consult with specialists in the oil field.

The writer is a reporter for the "Sub-Saharan Informer" and can be reached at fcgabanow@hotmail.com